Research from payments consultancy, Edgar, Dunn & Company, has reported that online marketplaces will struggling to grow unless they adopt innovative financial services technologies (fintech).

While more and more consumers are turning to marketplaces for their online shopping, the technology underpinning payments online has failed to keep up.

According to a study from the eCommerce Foundation, nearly 40% of online sales will be controlled by marketplaces by 2020. But despite this growth, the research pointed to several challenges which could be solved by fintech solutions, including: regulation, seller onboarding, payment checkout, split payments, seller settlement and unique fraud.

“As the marketplace sector matures and scales, it has become clear that the payments technology required to keep these businesses running has not kept up,” said Pascal Burg, director Edgar Dunn & Company. “From seller onboarding to regulation and fraud, marketplaces across Europe and beyond are constrained by existing systems. The fintech sector needs to rise to the challenge and deliver the technology these businesses desperately need.”

The report, ‘Marketplaces Best Practices for a Successful Payments Strategy’, was commissioned by SafeCharge and is based on a series of interviews with industry experts and marketplaces.

The report points to the difference between marketplaces and traditional eCommerce as being the relationship between buyers and sellers. While on a regular retail eCommerce site there is one merchant and multiple buyers, in a marketplace model there are multiple sellers and multiple buyers, with each transaction involving three parties: the seller, the buyer and the marketplace. This creates a number of complex challenges which could be addressed by fintech, for instance: quickly settling funds owed to sellers post-sale in their local currency, using a local payment method.

Yuval Ziv, COO at SafeCharge, added: “New business models, such as marketplaces, demand a new approach to payments. Money flow is shifting from one-to-many to many-to-many, as consumers flock to marketplace platforms where they can buy goods from a universe of different sellers. This research demonstrates that fintech isn’t meeting the needs of marketplaces today.”